Invoicing is an important part of small business accounting. But the payment process will always be problematic if you don’t set up your invoices properly. So what can you do to ensure that invoicing is easy and your customers pay promptly and regularly? How can your Melbourne accountant help you?
There’s much more to invoicing than simply sending out requests for payment. The key is to get your invoicing process right from the start.
It’s likely as a small business owner, you’re short on time, with many other elements of your business to set up, maintain and monitor. But making the effort to get the payment process right at the beginning will pay off in the end – literally. When your invoicing process is efficient and pain free, it’s likely that your cashflow will improve.
The majority of small business owners have worked as employees in the past, before deciding to set up their own company. The transition from employee to owner is not just practical and financial – it’s also psychological. In addition to this, if you’re having to now create invoices, you’ll realise how much time it can take to create and send them.
Employees become used to being paid regularly without having to think about it. The money appears in their bank account or they receive a cheque on the date it’s due. They never have to ask for payment – their pay simply arrives.
But business owners have to proactively chase payments – otherwise, they don’t get paid. And for some people, this can be a difficult adjustment to make. Consciously, you know you’re owed the money. But actually asking for it can feel daunting and stressful.
It’s common for small business owners to initially feel cowed into a feeling of subservience when it comes to asking for payment – particularly in dealings with larger organisations. But the fact is, they have taken your time and/or your product. This means they have a legal and moral duty to pay you according to the agreed terms.
So don’t be meek – be polite but firm. Your clients aren’t doing you a favour by paying. They must pay you, no matter how big or small they are.
You can’t invoice if you don’t have accurate records of the work you’ve done for your customers. Keep track of the time and materials expended on a client’s project and make sure you invoice for everything!
Use time-tracking software and time-sheets if you need to record the number of hours or days spent on a project. Be sure to record all Bills of Materials too. Some software will handle this for you.
If you record the work done as you go, it will save you having to remember the details at a later date. It also means you’ll be less likely to forget to include something in your invoice.